Malaysian Leader Faces Corruption Scandal As He Prepares To Meet Obama : ParallelsMalaysia's leader is at the center of a swirling scandal involving millions — if not billions — in missing money. It's complicating a crucial U.S. relationship in Southeast Asia.

Supporters of a pro-democracy group, Bersih (Clean), march in Malaysia's capital Kuala Lumpur in August. President Obama is set to visit and meet the embattled prime minister, Najib Razak, on Friday.
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Supporters of a pro-democracy group, Bersih (Clean), march in Malaysia's capital Kuala Lumpur in August. President Obama is set to visit and meet the embattled prime minister, Najib Razak, on Friday.

Edgar Su/Reuters/Landov

The next stop on President Obama's Asia trip is Malaysia, a country considered a reliable U.S. ally. But this visit comes just as Malaysia's prime minister, Najib Razak, faces international scrutiny and calls for his ouster over a swirling financial corruption scandal.

It's putting the U.S. in an awkward spot diplomatically.

The web of intrigue involves accusations of backroom deals, political patronage and millions — if not billions — in missing money. It all stems from a government-owned investment fund called 1MDB.

"The term 1MDB has come to stand in for a whole nest of political scandals and issues and problems," says Meredith Weiss, a political scientist at State University of New York-Albany. She specializes in Southeast Asia.

Malaysian Prime Minister Najib Razak waves the Malaysian flag during National Day celebrations on Aug. 31. He has faced widespread criticism and protests over allegations that huge sums disappeared from a government-owned investment fund.
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Malaysian Prime Minister Najib Razak waves the Malaysian flag during National Day celebrations on Aug. 31. He has faced widespread criticism and protests over allegations that huge sums disappeared from a government-owned investment fund.

Joshua Paul/AP

"Malaysia has had plenty of corruption scandals in the past. This isn't something new. However the scale of this is new. For Malaysia, this is record breaking," she says.

Prime Minister Najib created the 1MDB fund in 2009, luring companies and countries to invest. But the fund quickly amassed an estimated $11 billion in debt.

This summer, the Wall Street Journalbroke the news that nearly $700 million from unclear sources — but linked to the state-run fund — wound up in Najib's personal bank accounts. Najib didn't respond to requests for comment but has previously denied any wrongdoing.

"What I received was not from 1MDB or corruption," Najib said in August. "It is a donation for the party and corporate social responsibility activities. I didn't do anything for myself."

"Where did the money go to? What can we expect in terms of the debt that we are inheriting?" said Malaysian lawmaker Nurul Izzah Anwar, one of the prime minister's most outspoken critics and a leader of Malaysia's opposition party.

"How can any democratic government or any responsible prime minister justify the taking of 700 million in U.S. dollars in his own personal account?" she added.

The prime minister has survived politically, so far. He has jailed dissidents and suspended two newspapers from publishing. But that doesn't mean he's in the clear. Najib is now the subject of simultaneous investigations in Singapore, Hong Kong, Switzerland, Abu Dhabi and the U.S., by the Justice Department.

"So it's a very big deal that has really put Malaysia on the world map, for all the wrong reasons," Nurul Izzah says.

It's certainly muddied Najib's international standing just as he prepares to host a summit of the Association of Southeast Asian nations this weekend. He meets Obama on Friday.

"I would note that in addition to the meeting that the president will have with Prime Minister Najib, he will also have the opportunity to meet with civil society leaders in Malaysia, including advocates for good government," said White House Press Secretary Josh Earnest.

Meanwhile, the ceremonial sultans of Malaysia have weighed in. The said jointly that Prime Minister Najib's failure to resolve the corruption allegations have created a "crisis of confidence" in the country.

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